Eleventh Circuit Finds FAA Preempts Nascent Florida Law

The Eleventh Circuit has decided to proactively preempt Florida law, before it could get in the way of the FAA by favoring class arbitrations (despite contract language precluding them).

InPendergast v. Sprint Nextel Corp.,__ F.3d. __, 2012 WL 3553466 (11th Cir. Aug. 20, 2012), a wireless customer wanted to bring a class action alleging improper roaming fees. The arbitration agreements in the plaintiff’s contracts all waived class actions (for example: “We each agree not to pursue arbitration on a classwide basis”). But the plaintiff argued that the waivers were unconscionable under Florida law, because they effectively shield Sprint from liability from claims that are too small for consumers to pursue on an individual basis. Nevertheless, the district court granted Sprint’s motion to compel arbitration, and the plaintiff appealed.

In January of 2010, the Eleventh Circuit found that the appeal turned on unsettled questions of Florida unconscionability law and certified four of those questions to the Florida Supreme Court. However, the decision inConcepcioncame out before the Florida Supreme Court had spoken. Sprint then successfully moved the Florida Supreme Court to decline jurisdiction in light ofConcepcionand the case was bounced back to the Eleventh Circuit. At that point, the Eleventh Circuit affirmed the district court.

The final time around, the Eleventh Circuit said that it doesn’t matter what Florida law says about the conscionability of precluding class actions. Because either way, the language of the agreement must be enforced under the FAA. (If the Sprint agreement were unconscionable under Florida law, then that common law rule would be preempted by the FAA under the reasoning ofConcepcionand the agreement would be enforced. If the Sprint agreement were hunky-dory under Florida law, then the agreement would also be enforced.)

This is the first time I have seen a court of appeals find that state law, which has not yet been made, is preempted!

Liz Kramer is a shareholder at Leonard, Street and Deinard, one of the largest law firms in Minnesota, where she litigates complex business and construction disputes. Liz graduated from Yale Law School and is deeply knowledgeable on arbitration law. Website: www.arbitrationnation.com